IMF Raises India FY27 GDP Growth Forecast To 7% From 6.4% As Domestic Demand Stays Strong

The International Monetary Fund (IMF) has raised India's GDP growth forecast for FY2026-27 to 7% from 6.4% estimated earlier, after stronger economic activity and resilient domestic demand led the Fund to revise its outlook for the country.

In its latest World Economic Outlook released on Tuesday, October 13, the IMF also raised India's FY2027-28 growth forecast to 7% from 6.7% projected in July. The Fund attributed the FY27 revision to “stronger-than-expected momentum, supported by resilient domestic demand and robust services activity”.

The upgrade comes after India's economy grew 7.8% in FY26 and brings the IMF's latest estimate closer to the Reserve Bank of India's projection. The RBI recently raised its FY27 GDP growth forecast to 7.1% from 6.7%.

The change is also a reversal from July, when the IMF had lowered India's FY27 growth forecast to 6.4% amid concerns that higher energy prices would weigh on economic activity. With domestic demand holding up better than expected, the Fund has now raised the estimate by 60 basis points.

IMF Raises India Growth Forecast As Domestic Demand Holds Up

“India stands out with upward revisions,” the IMF said in its latest outlook, as it pointed to the country's performance at a time when growth across several major economies remains subdued.

The Fund said India's outlook reflects “sustained momentum and growing evidence of stronger growth potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms.”

The revised estimates mean the IMF expects India's economy to grow 7% in each of the next two financial years. The projections also come against a weaker global backdrop, with the world economy expected to grow 3.1% in 2026 before picking up to 3.4% in 2027.

China's economy is projected to expand 4.5% in 2026 before growth slows to 4% in 2027, according to the IMF.

Higher energy prices, however, remain a risk for India given the country's dependence on imported crude oil. The IMF has raised its crude oil price assumption for 2026 amid geopolitical tensions and concerns over global supplies.

IMF Sees India Inflation At 5% In FY27

Along with its growth estimates, the IMF expects consumer inflation in India to average 5% in FY27, compared with 2% in FY26, before easing to 4.4% in FY28. The FY27 projection is slightly below the RBI's inflation estimate of 5.2%.

The forecast comes after India's retail inflation rose to 5.54% in September from 4.83% in August, while food inflation climbed to 7.74% from 5.97% in the previous month.

The IMF also expects India's current account deficit to widen to 1.5% of GDP in FY27 from 0.7% in FY26, before narrowing to 1.3% in FY28.

The latest projections leave India's growth estimate at around 7% despite higher energy costs and uncertainty in the global economy, with domestic demand and services activity forming the basis of the IMF's latest upgrade.

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